You’ve heard the talk about a possible fiscal stimulus package to counteract the recession we may already be in.
Maybe we need it. It’s important to note, though, that the Bush administration has had a fiscal stimulus package of sorts in place ever since the middle of 2001. That’s when the federal government started spending more than it takes in. Just to review the deficits of the past six years:
FY 2002 (Oct. 2001-Sept. 2002): $157.8 billion (1.5% of GDP)
FY 2003: $377.6 billion (3.5% of GDP)
FY 2004: $412.7 billion (3.6% of GDP)
FY 2005: $318.3 billion (2.6% of GDP)
FY 2006: $248.2 billion (1.9% of GDP)
FY 2007: $161 billion (est.) (1.2% of GDP)
That’s almost $1.7 trillion in deficit spending, a.k.a. fiscal stimulus, from the Bush administration and its friends in Congress. (The deficits are even bigger if you factor in the debts being racked up each year to the Social Security trust fund, but since those don’t add any fiscal oomph I’m ignoring them here.) In July, the White House Office of Management and Budget forecast (pdf!) a $258 billion deficit for FY 2008. So far, tax receipts are coming in below expectations, so it is likely to be bigger than that.
What this last factoid means is that the slowing economy will generate some automatic stimulus as tax receipts lag and government spending chugs right along. Automatic stimulus is the best kind, because anything that has to be specially enacted by Congress takes months or years to have any effect, often kicking in well after the need has passed. But the fact that we’ve already been stimulating the economy with deficit spending for six years running makes me a little dubious of how much this year’s version can accomplish.